Postmaster general promises no more rate increases for two years

WASHINGTON -- Following a 3-cent rate increase expected this summer, the cost of sending a letter won't go up again for at least two years, Postmaster General John Potter said Friday.

Once the new rates are in place, "I am committed to maintain that rate schedule until at least calendar year 2004," Potter told a National Press Club audience.

The postal governing board is expected to give final approval next week to an increase boosting first-class stamps to 37 cents this summer.

The promise came as Potter detailed a transformation plan sent to Congress on Thursday that proposes major changes in the operation of the financially-strapped agency.

"If we don't accomplish transformation now, the universal service we rely on will be in jeopardy," Potter warned.

Rep. John McHugh, R-N.Y., a longtime advocate for postal reform, called on Congress to recognize the proposal as "a plea for help."

"Our nation's postal system is in crisis. It's not something five or 10 years down the road. The crisis is upon us," McHugh said.

While waiting for Congress to consider its proposals, Potter said the post office will take what steps it can to cut costs and improve efficiency.

As part of that, he announced, the Postal Service is ending its self-imposed moratorium on closing small post offices.

That does not mean there will be wholesale closings, Potter said, but the agency will be moving to shut down non-performing locations where service can be provided by other stations.

The agency will also be consolidating some of the 400 processing centers it operates across the country, he said.

And Potter said he is calling a summit meeting of postal officials, the independent Postal Rate Commission, major mailers, consumer representatives and others to discuss ways to streamline the complex process of changing rates.

It can take nearly a year to increase rates, something the post office wants Congress to change so it can more easily respond to market conditions.

The 450-page plan sent to Congress would overhaul the agency's operations, converting it to a commercial government enterprise with freedom to offer new products, negotiate prices with large mailers and be more flexible in purchasing.

In recent years the agency has been buffeted by rising costs -- especially for labor, fuel and transportation -- and declining business.

Potter said he believes mail volume will increase with the end of the recession, but there has been some loss to the Internet and that may increase in the future.

The post office lost $1.6 billion last year -- before the terrorist attacks and anthrax-by-mail that have posed hundreds of millions of additional expenses.

The post office has not received any taxpayer subsidy for operations for years, although Congress recently voted $500 million to assist in coping with the anthrax contamination and to seek ways to prevent it from happening again.

The Newspaper Association of America complained that the new proposal "is a flawed vision for the future."

John F. Sturm, president of the association, called for President Bush to appoint an independent panel to assess postal transformation.

However, the Direct Marketing Association, which represents companies that sell by mail, welcomed the plan.

"We believe that the Postal Service intends to move forward immediately and in a direction that will help to put it on a more financially sound footing," said H. Robert Wientzen, who heads the organization.